Crowdfunding raises approximately 2 million dollars a day. Should your small business think of getting in on the action?
Ten years ago, if someone mentioned crowdfunding we most likely would have thought of passing the plate at church, but modern day crowdfunding has become a significant source of operational cash for emerging startups around the world.
In 1997, a British rock band funded their reunion tour by encouraging fans to donate online. Inspiration struck and from it came the innovative financing method AristShare in 2000. Since then crowdfunding has grown year on year as a way of uniting as a community to back worthy causes.
As small business loans become harder to obtain many small businesses have looked to crowdfunding campaigns to get the start they need. Indeed, 2014 became a record-breaking year for crowdfunding sites like Kickstarter and Indiegogo; Kickstarter featured over 22 thousand different projects, raising $529 million and Indiegogo increased their funds raised by over 1000%.
Below are some great examples of crowdfunding success:
This small biz kicked off as a Kickstarter project and is (to anyone who loves to picnic) the best idea ever. Picture this: an ice chest with a built-in blender, Bluetooth speaker, USB charger, compartments for cutlery and a cutting board. Sounds great right? Well 62,000 others thought so too and raised over $13 million for a chance to buy their own.
Want to learn HTML, or want to try your hand at Java? Well now you can learn either from your desk chair thanks to a crowdfunding campaign. Code.org began as an Indiegogo project that raised over $5 million, giving 100 million students around the world the opportunity to learn to code.
Both of the aforementioned products have one thing in common: they fulfil a need, answer a question or solve a problem. Which leads us to our next topic…
How do I know if my startup would benefit from a crowdfunding campaign?
There are many questions that a small business owner should ask themselves before venturing out on a crowdfunding expedition:
- Does my product fill a need? Answer questions? Solve problems?
- Who would be interested in my product/idea/service?
- Do I have a solid plan for where to go and what to do after the funds are raised?
- How much money will I need?
- Why will others be interested in what I am offering?
- Have I explored all other funding avenues before considering crowdfunding?
If you can answer the above questions with certainty, there is a good chance that you are onto something and that a crowdfunding campaign might be exactly the boost you are looking for.
Steps to create a successful crowdfunding project:
- Create amazing content for the perfect pitch.
The message you send to potential investors is the most important part of any crowdfunding venture. This is the only chance you have to convince readers to invest their hard-earned cash into your idea so perfection is the goal. Write your pitch, and then rewrite it until it showcases your vision. Anticipate questions you may be asked and look for holes in your plan that you might be overlooking. When you believe your pitch is exactly right ask for help from others for a fresh set of eyes.
- Calculate how much funding you need.
Your funding requirements can be hard to estimate but it is important that your business plan be specific enough to calculate an asking amount that is not high enough to scare off potential investors and not so small that your business plan will come up short. Keep up with Midphase’s Starting Out In Business series for helpful tips.
- Pick a platform
Kickstarter, GoFundMe, Indiegogo… The list of crowdfunding sites is pretty long and each have their pros and cons. Do some research to find the best fit for your requirements. Some offer specific startup guidance that can make your busy life just a little bit easier; Inc.com created this handy inforgraphic to help you choose the perfect one. To avoid paying a percentage to your crowdfund host you might want to consider creating a website dedicated to your cause. Visit Midphase.com for an inexpensive and easy-to-use website builder to get started.
- Dip a toe in the water
When your crowdfunding project is ready to get underway make sure that you don’t launch a full scale campaign with $0 raised. Send it around to those that you know are interested before you Tweet and post. An empty crowdfund makes people hesitate and hesitation will not help you reach your goals.
- Offer value
A crowdfund is a promise or agreement between two parties. Sometimes all that is offered as a return is warm fuzzies. If this is the case make sure that yours are extra warm and particularly fuzzy. If you are pre-selling product or services as a promotional tool it is essential that you keep your end of the bargain. Nothing can sink a company like broken promises between buyers and sellers. One unsatisfied investor is the spark that can light a social media inferno.
How are your crowdfunding projects going? Let us know on Twitter @Midphase
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